We estimate a model for the process for setting IPO spreads and offer prices. We establish that the partially rigid spread schedule observed for IPOs, where over 90% of IPOs with proceeds between $20 and $80 million have a spread of 7%, can be rationalized as optimal collusion. Optimal collusion creates a rationale for high underpricing, and we use data on both spreads and underpricing to estimate structural parameters. Our estimates suggest that firms benefit from holding IPOs but that idiosyncratic manager preferences may drive much of the IPO market. Much of the money left on the table is estimated to accrue to underwriters.

We estimate a dynamic model of the decision to close a troubled bank. Regulators trade off an aversion to closing banks against the risk that allowing a bank to continue will raise the eventual costs to the deposit insurance fund. Using a conditional choice probability approach, we estimate the costs associated with closing banks, both in direct costs to the insurance fund and in other costs perceived by regulators, either social or personal. We find that delayed closures were driven by a desire to defer costs, an aversion to closing the largest and smallest troubled banks, and political influence.

We estimate a dynamic model of the decision to close a troubled bank. Regulators trade off an aversion to closing banks against the risk that allowing a bank to continue will raise the eventual costs to the deposit insurance fund. Using a conditional choice probability approach, we estimate the costs associated with closing banks, both in direct costs to the insurance fund and in other costs perceived by regulators, either social or personal. We find that delayed closures were driven by a desire to defer costs, an aversion to closing the largest and smallest troubled banks, and political influence.